El Al offered $40m loan on condition it takes 787s

Israeli flag-carrier El Al has tentatively agreed to a loan offer from Boeing Capital on condition that the airline takes Boeing 787 twinjets.

The loan, which El Al says amounts to around $40 million, would be available in two tranches: the first, covering $30 million, would be given in July this year and the balance in July 2014.

But the carrier adds that the loan's conditions include an agreement by the end of this year to lease two 787s, or purchase at least one.

The offer comes as El Al weighs options to replace its Boeing 767 fleet. It has been looking at the Airbus A330, but El Al has historically strong Boeing links and previous attempts by Airbus to secure a foothold at the carrier have failed.

However, the airline says it is still "evaluating" fleet-replacement proposals from both Boeing and Airbus as part of its strategic plans.

El Al is putting up a 10-year old Boeing 777-200ER as collateral for the eight-year loan. It adds that the loan repayment is interest-only for the first two years.

The airline has previously been in line to take 787s but dropped its commitment in 2006.

As part of the agreement El Al would also firm options on another two Boeing 737-900ERs, adding to the four it ordered last year. Deliveries of the first four aircraft would take place from October 2013 to March 2015 and the other pair in October 2015 and February 2016.

El Al is taking the six 737s - which it values at $300-320 million - to replace its Boeing 757-200 fleet.